What do traditional retailers need for success in the digital marketing era?

This study shows how a custom analysis and full view of cross-channel impacts can inform a marketing budget optimization to reach growth goals.

Background:

In the changing retail landscape, companies need to evolve their business and continue to improve their marketing ROI. Above all, traditional brick-and-mortar retailers must grow their ecommerce and digital marketing presence without losing efficiency or store sales.

In this case study, a top-20 retailer led the industry in realizing the need for an omnichannel strategy. They developed programs to create a seamless customer shopping experience across channels and now needed to grow their ecommerce and digital marketing presence to meet four key goals:

  • Increase ecommerce sales to 20% of the business
  • Protect the sales of their 600+ stores
  • Maintain their marketing ROI
  • Understand the sales channel impacts of each media in the marketing mix

Action:

HRG’s marketing mix models measured the incremental impact of each media on both the store and ecommerce channels (Figure 1). This revealed that certain media had a distinct role in the primary channel they drove.

As a result, a simple marketing optimization would ignore the ecommerce goals and favor stores (the larger share of the business). Meeting the new goals required a more tailored approach to determine the optimal marketing mix.

HRG used the Integrated Marketing Allocation Planner™ to work with the client on a multi-step scenario plan:

  1. Determined the sales channel trade-offs of shifting out of traditional media to a digital-heavy strategy
  2. Built total budget scenarios with the priority of achieving maximum ecommerce growth while protecting store sales
  3. Further optimized locally controlled spend (e.g. Social and Direct Mail) at the market level
Figure 1

Recommendation:

A few key recommendations came out of this process. Some examples include:

  • Invest in Search as the most important digital driver to grow the ecommerce business
  • Protect the Promotional Video budget to help maintain store sales
  • Reduce Direct Mail spend through surgical cuts, only supporting key markets

Results:

The client used this guidance to evolve their marketing mix. As a result, they pivoted from a brick-and-mortar-focused company to a growing omnichannel business:

  • Ecommerce sales grew from 5% to 20% of the business
  • Digital media increased to 35% of the mix
  • The total marketing ROI surpassed $8
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